Lucrazon Global, in prelaunch until January 2014, faced scrutiny for its "revenue sharing" business model. Concerns included a lack of detailed public information regarding its credited CEO and Founder, Alex Pitt, and an apparent absence of retail product sales to non-affiliate customers.
The company's revenue stream appeared to derive primarily from its affiliates. Money paid in by new affiliates then funded payouts to those who had already invested. This structure meant that revenue was generated internally rather than through external consumer purchases.
Recruitment commissions were also offered, paying affiliates for new members they brought in. This payout on new deposits indicated a Ponzi/pyramid scheme hybrid model, a pattern seen repeatedly in other ventures that year.
Affiliates bought positions, each costing $1000, with a cap of 15 positions or $15,000 per person. Lucrazon then paid out a daily "revenue share" from these funds, after deducting referral commissions. To qualify for this daily share, affiliates were required to submit a random merchant's contact details every 90 days. New affiliate position money financed the payouts to existing position holders.
The core problem with Lucrazon's MLM business model centered on the flow of new affiliate money at $1000 per position, which then paid out to previous $1000 position holders. The legitimacy of Lucrazon's standalone e-commerce platform or replicated websites was not the primary issue. The structure consistently sold unregistered securities, regardless of its presentation.
The logic faltered when considering why a legitimate merchant would pay up to $15,000 to market merchant services and an e-commerce platform. From a passive investor's perspective, however, the model was clear: invest $1000 and receive more than $1000 back. Retail revenue in Lucrazon's business model also appeared questionable, as there was little functional difference between a merchant signing up for a $1000 position and an affiliate doing the same.
Alice Ly, identified as Lucrazon Global's Social Media Manager, later posted a blog entry titled "Alex Pitt and Lucrazon Global Facts." This post aimed to address the questions raised about the company's revenue-sharing model.
